In defense of 'overcompensated' employees

MICHAEL ZUCCHET

It’s not your fault if you believe that the average San Diego city employee earns a $100,000 salary and an even larger pension when retired. For years, a few politicians and most media outlets have repeatedly focused on the compensation of a small number of management employees and city attorneys to imply that those numbers are representative of the pay and pension packages of the other 10,000 city employees.

But they are not. The average annual salary of general employees working for the city is $53,000, while their average pension is $37,000 after dedicating three decades of their professional lives to the city. General employees include those who staff your branch libraries, dispatch your 911 calls, engineer public works projects, ensure the safety of your water and pick up your trash. They make up about two-thirds of the city’s work force. They also contribute a significant portion of every paycheck to pay for their pension and do not receive a Social Security benefit because the city stopped paying into Social Security 30 years ago to “save money.”

These pay and pension facts may not match popular perception, but they are undisputed facts that often get lost in a sea of rhetoric and politics in San Diego. Reasonable minds may differ as to whether an average annual salary of $53,000 and an average annual pension of $37,000 (with no Social Security) are “fair” levels of average compensation for general city employees. Comparisons to other public- and private-sector employees can be helpful in that debate. Using either as a benchmark, studies demonstrate San Diego city employees earn less than those public employees doing the same work in other major cities, and earn less than those working in the private sector with the same education and training.

Perhaps because of these realities, some have now begun to argue that “labor costs” for city employees are too expensive, rather than arguing that their actual compensation is too generous. What’s the difference between “compensation” and “labor costs”? It’s a few billion dollars. San Diego’s labor costs – notably pension and retiree health costs – are largely a result of decades of underfunding which have now come home to roost, not a result of overcompensation. When the substantial investment losses associated with the recent unprecedented recession are added to the mix, the unfunded obligations are bigger than ever.

But the city’s unfunded obligations are the product of deliberate fiscal decision-making over three decades and do not reflect the reality of what general employees earn today.

To illustrate, Mayor Pete Wilson was the proponent of getting the city out of Social Security in 1981 to save on payroll costs. To induce city employees to agree, Wilson promised “city-paid” lifetime retiree health benefits. But Wilson didn’t fund the promised benefit with the payroll savings. Instead, he appropriated those funds for other priorities and thus avoided any revenue increases or service reductions. Meanwhile, the promised retiree health benefits were paid from the pension plan using so-called “excess” earnings.

The folly of this approach is now well understood because it led indirectly to further underfunding of the pension plan. But this “strategy” of not funding long-term employee obligations originated with Mayor Pete Wilson – not city employee unions or “union-backed City Councils,” as is so often claimed. Wilson’s legacy of funding promised benefits only on a “pay-as-you-go” basis and to do so using pension plan earnings became the norm for every mayor who followed. Only under the leadership of Mayor Jerry Sanders and current City Council members did pre-funding of this benefit begin in 2007.

The city’s current unfunded obligations are a product of deliberate choices elected officials have made over the past three decades: choices to fund high-profile building projects rather than pre-fund promised benefits; choices to promise enhanced retirement benefits rather than increased salaries in order to avoid straining annual budgets; and choices not to raise revenues or cut services but instead to “rob Peter to pay Paul” every year to balance the budget.

The reality is that the average city employee is just another taxpaying member of our community’s hardworking but diminishing middle class. While the civil (and sometimes not so civil) discourse continues as to how to strengthen our fiscal future, the city’s past deliberate choices must be honestly acknowledged, and the temptation to demonize and blame city employees for the choices made by others must be resisted.